Beyond the Barriers: Deconstructing the Regulatory and Reimbursement Hurdles for Companion Diagnostics

On November 16, a group of diagnostic industry representatives will convene to discuss the regulatory and reimbursement hurdles for personalized medicine diagnostics during the 12th Annual Personalized Medicine Conference at Harvard Medical School. These kinds of discussions have never been more important.

The push for personalized medicine came to the national forefront in January when President Obama announced the National Cancer Moonshot. This bold initiative aims to accelerate the discovery of personalized treatments tailored to an individual’s genetic profile and/or the tumor’s biology. Companion diagnostics (CDx) play an important role in precision medicine, as they are designed to enrich care for patients who will benefit from a “companion” drug, by helping to characterize the disease’s biology and matching it with the mechanism of action of a specific drug.

Because many of the new drugs in the pipeline work on a specific genetic or biological target that is present in some, but not all, patients with a certain kind of cancer, there is a need for an accompanying test to determine if the drug will or will not have a benefit for a specific patient. These tests may also point to which patients are at immediate risk for harmful side effects.

The promise of companion diagnostics is not under debate, but there are regulatory and reimbursement hurdles that need to be overcome before these tests achieve widespread acceptance and deliver on the promise. First is the cost. The development of a companion diagnostic requires a significant investment, along the lines of tens of millions of dollars. However, presently, the value that companion diagnostics bring to the health care system, specifically in terms of improving patient outcomes and effectiveness of the care delivered, is not appropriately recognized by the reimbursement system.

Supporting the development of CDx tests will require significant investment up front, but once adopted they will help the health care system realize considerable cost and time savings. Currently, the health care system favors the “one-size-fits-all” approach to drug delivery, despite the fact that the subgroup of patients benefiting from treatment is on average only 20 – 30 percent. By using CDx, we can enrich the patient population for which a specific drug is effective, resulting in better outcomes and significantly reduced costs for the health care system. Designing and executing appropriate clinical trials to demonstrate the “clinical utility” and cost-effectiveness of selection biomarkers in each particular clinical setting will be an important part of the evidence needed to obtain test reimbursement.

Another obstacle involves how CDx and personalized medicine have impacted the regulatory landscape. While the regulatory path to a CDx is relatively well defined by regulatory guidelines, a gray area remains on when/how a “generic” version of those tests (aka laboratory-developed tests or LDTs, which are analytically developed by a single laboratory without a clinical validation requirement) will be regulated by the FDA. This uncertainty has negatively affected the investor community’s appetite for diagnostic companies.

In light of these hurdles, a promising solution to driving CDx adoption is partnership among diagnostic manufacturers and the pharmaceutical industry. Biopharmaceutical companies are developing many therapies and as a result need to enroll patients in many hundreds of clinical trials. The clinical development of their drugs is going to demand enrichment strategies based on biomarkers. In fact, I can see a future in which it is the exception, rather than the rule, that drugs don’t have biomarkers when they come to market.

The biopharmaceutical industry is going to work with in vitro diagnostic companies that have the technology and the capabilities to both analyze the tumor’s biology and build an in vitro diagnostic product that can win clearance from the FDA. Ideally, these tests will be able to cut across whole drug classes (targets). Because of a limited supply of biotissue, the tests will need to be as holistic as possible. Thus, multi-plexed assays that allow for investigation of multiple aspects of biology in a single sample would be preferred.

Because of their unique ability to “match-make” a tumor’s biology with the right therapeutic choice, companion diagnostics are important for the efficient and effective treatment of patients. If the National Cancer Moonshot and other initiatives are going to be successful, there needs to be an alignment among all the stakeholders — including regulators, payers, pharmaceutical companies, physicians, patients and advocacy groups — recognizing the value of companion diagnostics in making “precision medicine” not just a promise but finally a reality.

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Launched in July of 2015, Education & Advocacy continues a history of thought leadership that began in 2009 with a blog called The Age of Personalized Medicine. Like the Age blog, Education & Advocacy features commentary by PMC's senior leadership and guest entries from the field's most influential champions. Use the 2009 - 2014 Archives link at the top of this page to access the historical Age blog content and the links below to navigate the content in this blog.